It is 4 am, and the coastlines are crowded with fishermen and fish traders. The fishermen, however, began their day the previous evening, at 4 pm, engaged in the bidding process, to get the best price for their fish from the middlemen. While what the middlemen pick are fresh off the coasts, the fish you finally get to make your curry with is far from fresh.
The middlemen who sell the fish and meat to consumer markets put the fish and meat in plastic crates filled with ice and liquid ammonia. This is done to reduce the cost of ice and transportation.
So the produce that one gets in a Bengaluru or a Delhi fish market may look good but would have started rotting. This is because, without a tight cold chain, bacterial contamination starts within 30 minutes. This line of process has left two sets of people unhappy: the fishermen who don’t get the right prices for their fish, and the end consumers, who don't get fresh fish for the money they pay.
FreshtoHome intends to turn this whole process on its head. An online marketplace for fresh fish and livestock produce, FreshtoHome sources meats and fish directly from livestock farmers and fishermen. It aims to supply fresh produce at mass market prices, by essentially cutting out the middlemen. The idea is to keep those at both ends of the spectrum—consumers, and fishermen and livestock farmers—happy.
“In our own internal research of about seven to eight samples in Bengaluru, we found that over 60 percent of these samples had ammonia in them. Delhi in turn had 65 percent ammonia and 15 percent formalydene,” explains Shan Kadavil, Co-founder, FreshtoHome.
The consumer thus doesn’t get chemical-free produce.
From Sea to Home to FreshtoHome
Like any true-blue Malayali living in Kerala, for 39-year-old Shan, the hunt for fresh fish was perennial.
He would find solace in the online platform ‘Sea to Home,’ which was started by fish exporter Mathew Joseph out of Kerala. Established in 2012, Sea to Home would export fish from Cochin to Delhi and Bengaluru. “Sea to Home was possibly one of India’s first ventures in the food space,” says Shan, a former Zynga Country Manager, and Founder and CEO of Dbaux.
However, not being a consumer player and the lack of e-commerce understanding made it difficult for Mathew to scale, and the platform was unsuccessful. Shan says:
“While Mathew was unhappy, I was unhappier, as I couldn’t get good fish. Starting FreshtoHome wasn’t just about the market size or opportunity, it was a purely selfish reason for the need for good fish.”
But the market opportunity itself cannot be ignored. According to statistics from the Indian government, Fisheries Ministry, the market size for just fish in India is $50 billion. The country is the world's second largest producer and consumer of fish.
The fresh meat industry, in turn, is highly fragmented, with the current size in India being around Rs 1,80,000 crore.
Armed with the love for fish and backed by data, Shan hunted for Mathew and convinced him to come on board as a co-founder. Wanting to expand the line from fish to meats, Sea to Home transformed into FreshtoHome, with a bigger and newer team of former Zynga employees, advisors and executives – BM Tambakad, Suresh Parameshwaran, Jayesh Jose, Nilkamal Malakar and Prashun Purkayastha.
Breaking the market
The team had quit Zynga in the early half of 2015 and were trying out different ideas, but when they saw the market opportunity of fisheries and meat they wanted to explore the opportunity.
Due to his booming fish export business, Mathew's expertise came in handy to break down the local coast sourcing, working along the local languages and fisherman community across coastlines.
Launched in August 2015, FreshtoHome also raised seed investment this January, from Mark Pincus of Zynga, David Krane, Managing Director of Google Ventures, Rajan Anandan of Google, Paval Ongole, ex–India Head of Softbank Capital, Walter Kortshack of Kortshack Investments, Pete Briger, Chairman of Fortress Investment Group, Timothy Flaherty, Co–founder Silver Creek Capital, Cadir Lee of Zynga and OhmConnect, and Alex Garden (Relic Entertainment, Nexon, MSFT, and Zynga).
Louis Selincourt, one of the Valley-based investors in FreshtoHome, says that the team stood out as one of the biggest reasons for his investing in the company. He says:
Having known the team for years now, I knew what they were capable of and they have built multi-million dollar business in India and for multi-national companies.
How does it work?
FreshtoHome takes the meat and fish from the fishermen and farmers, keeping the cold chain intact between zero and five degree Celsius. They spend Rs 35-38 on packaging material and reverse osmosis-treated ice, which ensures that this cold chain remains intact.
“Because of the sheer size of the coast and it being so fragmented, the brick-and-mortar approach of putting one person in every coastline isn’t effective. So we created an Android app, which is essentially used by all the fishermen community,” says Shan.
The app has pictures, with which the fisherman and livestock farmers can bid the price at which they intend to sell their stock. Then the system places a purchase order, thus working as a virtual trading commodities exchange.
After the purchase order is placed, FreshtoHome sends its trucks across South India, all within a 100km distance, where it can easily source the meat and fish from an entire area and bring it back. There is a parallel export business as well, which gives FreshtoHome a large procurement volume, thus subsidising the cost of the product.
Dealing with the market
The fishermen and livestock farmers are trained on quality and grading, and are given financial advances to work as a marketplace vendor.
FreshtoHome initially faced challenges from the local middlemen and supply chain. However, the team broke the ice by working with the local players to source the produce.
There are different challenges to deal with – local middlemen and, issues of the local supply chain. To combat this the team decided to collaborate with the local supply chain.
The team now manages the entire cold chain, with trucks coming in from the entire southern coast of the country.
For Garden (one of FreshtoHome investors) this is the first investment in a ‘food delivery business, because he felt that a majority of investments made in the foodtech and food delivery space have one fundamental problem – they are tech companies that are entering into food. He says,
Unless you are passionate about food it is a difficult business to crack. Most of these companies have a margin structure that is impossible to crack and don’t make it profitable.
But with FreshtoHome, Garden felt that the startup wasn’t just a delivery business. The commodity exchange helped them directly speak to and buy from the farmers and fishermen, saving a lot of precious time.
What do the numbers say?
The team claims to be selling close to six tonnes of produce per day. While it was easy to on-board the fishermen, on-boarding of the livestock owners meant scouting across different farms, meeting and convincing the livestock farmers to come on board. There are now over 1,000 fishermen and farmers on the network providing produce to over 50,000 customers.
Of FreshtoHome's over 200-product range, the antibiotic-free chicken is its single highest selling produce.
“We are growing at a pace where we have had to double our factory. We are doing close to 2,000 orders daily,” says Shan.
The team currently claims to have a 60-80 percent of month-on-month repeats. It is active in Bengaluru and has a gross margin of close to 30 percent, owing to the fact that it works directly with the source.
However, one of the key challenges in a food e-commerce business is scaling. The moment the order values start crossing 1,000 the company becomes mainstream. The team expects to reach 10,000 orders in Bengaluru and is in the process of raising its Series A round of funding.
Shan believes that every online player has only one competition – the local wet markets that bring in close to 1,000 tonnes of meat everyday.
“How can you be a strong player in that segment and reach the mass market? This is the challenge we intend to solve,” says Shan.
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- Shan Kadavil
- David Crane
- Paval Ongole
- Pete Briger
- Timothy Flaherty
- Suresh Parameshwaran
- Jayesh Jose
- Online meat startups
- Kortshack Investments